South African financial services group ABSA, formerly the whole owned subsidiary of Barclays Africa Plc is considering getting a banking license in Nigeria, after it begins trading on the Nigerian stock exchange by the end of July.
This is part of its plans to provide financial services to its international clients who are willing to get exposure to the Nigerian market and vice versa,” Garth Klintworth, head of markets for Barclays Africa Group, which was recently acquired by Absa told BusinessDay in a side interview at the Financial Times Summit in Lagos last week.
“As a bank, we are considering how we enter Nigeria possibly from the point of view of a commercial banking licence perspective. We will love to have the luxury of just acquiring something but valuations are quite high so entry is just going to be a mixture of organic growth as well as acquisition possibly but it depends on valuation. The problem with organic growth is that it takes too long and Nigeria is a competitive market. There are good banks run by competent people and it is quite difficult to enter.”
Klintworth said that it is important Absa has a presence in Nigeria for the bank to be looked at as an African bank in Africa that provides regional relevance.
“We have a strong presence in many other countries that accounts for about 60-70 per cent of Africa’s Gross Domestic Product (GDP) but we have to have a presence in Nigeria and that is what is missing in our strategy. That is why we are thinking very hard on how we can credibly call ourselves an African bank in Africa by including Nigeria in our presence.”
For acquisitions of existing banks to be attractive as an entry strategy, Kintworth explained that current valuations of Nigerian banks will have to drop by at least 20 percent. He also ruled out the possibility of acquiring any of the existing troubled banks in the country because of the fear of finding out that they have too much issues to be dealt with after acquisition.
He also disclosed that all is set for the securities subsidiary to open in July on the Nigerian Stock Exchange (NSE).
“We have a representative licence that has been working for years, in addition to that, we have what is called a security licences that allows us to do underwriting and investment banking activities. We also have in principle, a licence that we are closing on with the Nigerian Stock Exchange to allow us to do stockbroking and security trading.”
“We have also employed people and by the end of July, we should be able to start trading directly and transact securities on the stock exchange,” He added.
On the things that he would like to see improved on based on his experience trying to get a trading license, he said that getting approval for entry into the Nigerian financial market takes too long and wish it could be shorter.
The Absa group is one of Africa’s major financial service providers offering personal and business banking, corporate and investment banking, wealth and investment management.
Barclays Africa Plc, which used to be the majority shareholder has sold its majority stake to minority shareholders. This will see a change of name of the Barclays Africa subsidiaries to Absa by the end of 2020.
“We have always wanted to do something in Nigeria but Barclays Plc was our largest shareholders and there was limited appetite for them to come to Nigeria. But now that Barclays Plc are divesting from Barclays Africa group Ltd and are no longer the highest shareholders, we are able to execute our own strategy and our own strategy is seeing us opening up in Nigeria,” Klintworth explained on why Absa is just looking at establishing in Africa’s largest market.
“We should hopefully bring more capital investment into Nigeria by way of our international client base. We will also be able to give a regional or African view of the continent something that other banks can’t do because they don’t have a big picture view of what is happening in the continent because of the strength of position of our entity and geographical foot prints.”
Absa Bank Limited (Absa) used to be wholly-owned subsidiary of the Barclays Africa Group until it sold its majority stakes in 2017.